Renault- Nissan Strategic Alliance

Renault – Nissan’s Strategic Alliance model

Leading to High Performance

19 May 2010 1Renault-Nissan

Agenda

Introduction of the company Industry dynamics The Alliance of Nissan and Renault – Objectives

and Goals Current business model Turnaround strategy Leadership of Carlos Ghosn Current Performance of the company

April 7, 2023 Renault-Nissan 219 May 2010 2Renault-Nissan

Introduction of the companies

By 1999, the environment of car manufacturers has become super competitive: globalization driven by market internationalization need for Renault and Nissan to reach critical size saturation of certain geographic areas for production and

distribution.

Opportunities for survival - 4 million vehicles; new areas (Asia, Latin America)

Address market saturation in Europe Cope with Asian leader Toyota

Founded 1898

Cooperation with Volvo 1990

Alliance with Nissan 1999

Founded 1911

Financial distress 1990

Alliance with Renault 1999

Renault

Nissan


Industry dynamics

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Rivalry among

competitors - High

Buyer power - High

Supplier power - Medium

Threat of new entrants

Low

Threat of substitutes -

Medium


HHI - competitiveness in an industry - Automotive Vehicles 2754.0 Porter’s five forces Industry life cycle – Mature

Strategic Alliance

Definition Agreement for cooperation among two or more

independen firms to work together towards common objectives

Companies in a strategic alliance do not form a new identity to reach their aims but cooperate while remaining apart and distinct

The alliance between Renault and Nissan was signed on 27th of March, 1999


Nissan’s problems before the alliance

Nissans problems before the alliance company was falling apart $ 20 billion in debt

The reasons of the problems Recession in early 90’s in Japan There was complacency and a lack of urgency in the culture There was no cross-functional and cross-regional

communication The design of the cars was out of touch with the market A high degree of bureaucracy There was an emphasis on engineering culture rather than

managerial culture and promotions Sticking in the Keiretsu model

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Main source of revenue - small to medium size cars in Europe

85 % of sales in Western Europe -> go international

Renault’s problems before the alliance


Aim of the alliance Two principles

Developing all potential synergies by combining the strengths of both companies through a constructive approach to deliver Win-Win results

Preserving each company’s autonomy and respecting their own corporate and brand identities

Three objectives Quality and value of products and services in each region and

market segment Key technologies in engines, electronics and the environment Operating profit


The objectives of the alliance

Renault Nissan

Respective objectives

Improving qualityInternationalize

Reduce CostsReduce Debt

Common objectives

Economy of scaleTechnological Know-How

Leader for the quality and attractiveness of products & services


Key success factors of the alliance

Quality between the relationships among the managers and engineers of Renault and Nissan

Business experience Technical skills Core values:

Balanced relations between the two companies and the development of strong identities for each of the brands

Other factors: Alliance charter Capital contributions and equity participations Management structure and exchange of personnel


Goals Achieved by the Alliance

Third largest global automaker (based on sales for the year 2008)

Global market share of 9% (by volume) Significant presence in major world markets

(United States, Europe, Japan, China, India, Russia)


Corporate Structure of the Alliance

Renault-Nissan BVstrategic management company

Alliance Board of DirectorsCarlos Ghosn

Renault-Nissan Purchasing Organization

Renault-Nissan Information Services


Management Structure of the Alliance


Observable SymbolsCeremonies, Stories, Slogans,

Behaviors, Dress, Physical Settings

Underlying Values,

Assumptions,Beliefs, Attitudes,

Feelings

Levels of Corporate Culture


Profitable growth worldwide

New Strategies

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15

Renault-Nissan

An Open System

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Raw materialsInformation resourcesFinancial resources

InputTransformation Process

OutputProducts

and Services

Renault-Nissan

31/12/95

Renault

Renault VI / Mack VI

Renault

Nissan

44,4%

Dacia

92,7%

Samsung70%

AB Volvo

100%

Renault VI / Mack

20%

01/07/02

Renault Nissan Group – a Global Player


Common platform with Nissan for small cars

Joint research projects and exchange of components (leading to standardization of these products)

The decision to return to the Mexican market, using Nissan’s powerful industrial and commercial presence

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Current Business Model Post Merger Strategy

Renault-Nissan

Further expansion in Europe and growth in Asia

To draw on the strengths of complementary expertise in sales and technology, and to reduce costs and enhance performance.

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Current Business Model Post Merger Strategy

Renault-Nissan

Restructuring

The aim of this restructuring was to be profitable and competitive

Sales & Marketing, Distribution, Human Resource were the key areas where restructuring initiatives have taken place.

The first important step taken by Renault was to broaden the notion of service to its customers. That led to the creation of two new entities: the Service department and the Distribution Project department.


Trust, addition of value to both sides, high commitment

Equity, fair dealing, both profit

Electronic linkages to share key information, problem feedback and discussion

Mechanisms for close coordination, people on-site Involvement in partner’s product design and production, shared

resources

Long-term contracts

Business assistance beyond the contract


New Orientation Partnership

Transnational Model of RENAULT-NISSAN

Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships.

Structures are flexible and ever-changing.

Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole.

Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems


Contingency FactorsAffecting Organization Design

Strategy

Environment

Size/Life Cycle Culture

Technolog

y

RENAULT-NISSANOrganizational Structure and

Design


Who is Carlos Ghosn?

Born on 9th March, 1954, in Porto Bello, Brazil Moved to Lebanon with his parents in 1960 for primary education in a Jesuit

School Throughout his life he lived and worked all over the world and gained wide

cultural awareness Spent 18 years with Michelin in Brazil and North America Joined Renault in 1996 as Executive Vice President of Advanced R&D,

Manufacturing and Purchasing Appointed as COO of Renault in 1998. Joined Nissan Motor as Chief Operating Officer in June 1999 and was named Chief

Executive Officer in June 2001. President of Renault since May 2005 Remains President and CEO of Nissan Carlos Ghosn is also a director of Alcoa and AvtoVAZ. He is appointed President and CEO of Renault on May 6, 2009.


Fiedler`s Contingency Theory


Fiedler`s Contingency Theory


Turnaround strategy Lewin’s model


Unfreeze•Admit change was needed•Establishing new company teams •Closing plants•Cutting jobs•Reducing purchasing costs

Change•Introducing new models •Establish common pool for resources•Inter-cultural and management trainings•Common marketing and sales approach•New HR policy

Refreeze•Ensure acceptance •Promote freedom of operations•Establish close reporting system•Common value creation• Involvement in design and production


SWOT – External Analysis Automakers face legislation increasingly restrictively on the fuel

consumption Market has become hyper-competitive Heavy investment in R&D Strategy of cost becomes the major issue

The opportunities in Asia :Country China Malaysia Singapore Hong Kong Japan

Qualification of workplace

Cost of labor

PIB per person

Politic Stability

Taxes

Unemployment

Very Favorable Favorable unfavorable


SWOT External Analysis Cont’d

To stay competitive Renault must diversify geographically by integrating a company that already has strong position in Asia, particularly in the regions identified - Nissan meets these criteria geography.

However, the settlements are a necessary but not sufficient in the choice of partner


SWOT - Internal AnalysisStrengths Renault Weakness NissanCost Control Debt Recurring Losses

Innovation, creativity, imaginationLack of creativity and renewal of its

Products

Overall management and strategic platformsproduction and supply

Poor management capacity

Privileged relationship with suppliersSupplier relationships (vertical Keiretsu) in

mismatch with a globalization strategy

Capacity Management Management & slow conformist

Strengths Nissan Weakness Renault

Quality Products of poor quality Timeliness of Filing Delay in production time

37% of the total distribution in the U.S. and 28%Japan

Lack of notoriety in Japan & USA (0% of the distribution)

18.5% of cars with engines up torange on all of their production

Opportunities insufficient to justify the development

and production of top-end engines (4.5%)

The majority of the weaknesses are strength for Nissan Renault and vice versa: we can say that they are complementary in many respects. Moreover, we note that Nissan weaknesses are only due to a bad optimization from their resources and skills.


The benefits of alliance with respect to other strategies

In the market for car manufacturers, the only appropriate strategy is that allows the rapid acquisition of new skills.

Strategy of horizontal diversification. Merger Acquisition Alliance

Complementarities between the strengths and weaknesses of both companies

Distinctive resources and competencies Learning: major challenge - little degree of synergy would cause a high

cost of restructuring Advantages of the alliance before merger and acquisition

economies of scale, geographically diversification, the reputation, the bargaining power



Thank you for your attention!


Renault- Nissan Strategic Alliance

Business

contingency

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